U.S. payrolls in November increased by 263,000, above the consensus of 200,000, though it was coupled with downward revisions of 23,000 to the prior months, pulling down the six-month average to 323,000. The unemployment rate held steady at 3.7%, but the labor force participation rate edged lower.
More importantly, average hourly earnings ticked higher from October and remains well-above the pre-pandemic rate. The same occurred for rank & file workers. This indicates a stronger economy than many are giving it credit. Yet, below the surface, substantial cracks are visible, especially on the industry level, including general merchandisers and temporary help.
Ultimately, the labor market is cooling but remains surprisingly resilient. Thus, the Federal Reserve (Fed) will continue hiking interest rates to further slow the economy. However, with cooling inflationary pressures elsewhere, we believe that the Fed will stepdown the size of hikes to 0.50% at the December 14 meeting after four supersized rate hikes of 0.75%. Lastly, investors may largely ignore this report since it doesn’t change the prospects of higher interest rates nor the likelihood of a recession.
A review of major industry trends
Private payrolls increased by 221,000 workers and government payrolls rose by 42,000. Service-providing industries added 184,000 positions, while goods producers hired 37,000.
Below the surface, definite cracks have appeared in recent months.
Retail trade lost 30,000 workers during November, the third straight monthly decline. Much of the pain was within general merchandise stores, which lost 32,200 jobs, offsetting small gains elsewhere. Since March, general merchandise stores have lost 129,000 positions. Apparel stores have also clipped workers, including 5,000 in this past month.
Similarly, tucked within professional & business services, temporary help shed 17,200 workers in November. Following prior monthly revisions, temporary help declined for the fourth month in a row, or a cumulative total of -46,500.
Warehousing & storage cut 12,500 workers in November, the fifth straight decline for a total of 63,500 positions. Couriers have lost 14,000 over that same span.
On the other hand, leisure & hospitality added 88,000 workers in the month, with more than two-thirds hired at restaurants (62,100). Still, the leisure & hospitality industry remains 980,000 workers below pre-pandemic levels.
Government payrolls increased after experiencing losses during the spring and summer. Most of the recent gains have been within education, including 24,300 during November.
Lastly, health care has finally recovered to pre-pandemic levels, having lagged nearly every other major industry group except government and leisure & hospitality.
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